Our health insurance system is broken. The question before the people of Colorado is how to fix it.

The legislature created a commission in 2006 to solicit and evaluate proposals to reform Colorado’s health care and health insurance system. The legislature is expected to enact major health care reform legislation in 2008.

Here are some of the factors we must keep in mind as we consider health-insurance reform.

With 770,000 Coloradans uninsured, a similar number underinsured and many more financially strained by their current health insurance costs, radical changes are necessary. The number of people who receive health insurance benefits from their employer continues to decrease, throwing an increasing number of people into the prohibitively expensive individual market, or into the ranks of the uninsured.

The health-care costs of the 770,000 people who are currently uninsured don’t just go away. People get sick even if they have no insurance. Uncollectible bills are recouped by adding an average of $930 to the annual premium of those who have health insurance.

Our health care dollars must go farther by putting more of what we spend into providing care. The United States spends approximately 16 percent of its gross domestic product on health care. Other industrialized Western nations spend far less, yet our health indicators lag behind theirs. As much as 25 per- cent goes to insurance company overhead, and an additional 12 percent is spent to process insurance papers and sort out what benefits are available under the many different plans. As much as one-third of premium dollars spent in the private sector do not go toward health care.

Our current system burdens businesses in the private sector with costs that are unrelated to the goods and services they provide. Employers who provide health insurance spend approximately $8,500 per employee for family coverage, while the employee spends $3,000. Employers incur administrative costs in the form of $57 per employee for staff to analyze benefit plans and administer their benefits packages. The cost to employers of providing health insurance currently operates as an 8 percent payroll tax. Companies that do provide health insurance are at a competitive disadvantage compared to those that do not.

Health insurance can be provided without devoting dollars to activities whose purpose is to maximize profit rather than make people healthy. The Medicare system spends 3.1 percent of its costs on administrative expenses. Non-profit Blue Cross and Blue Shield companies spend 16.3 percent on administrative expenses. As much as 25 percent of what commercial carriers collect in premiums is spent on advertising, screening out unhealthy applicants, executive compensation, shareholder profit, and paying a staff whose job is to second-guess doctors and deny benefits. This spending saves money for the health insurance company and increases profit. But the cost of health care for those who are denied coverage is shifted to the taxpaying public or to the premiums of those who have coverage.

An employer-based benefits system disrupts the labor market and hampers competition. Employees who have health insurance benefits are reluctant to change jobs for fear of losing their coverage or seeing an increase in cost. Health insurance considerations may prevent them from fully utilizing their potential in a different job, and unproductive employees stay on the payroll because of medical issues. Employers may not hire the best candidate for the job due to concerns about increased health insurance costs, or may not expand because of the cost of additional benefits. Companies that cannot afford to provide insurance may lose out on the most experienced, talented employees. In myriad ways, health insurance drives employment and business decisions.

We must begin with the premise that health care is a basic right. We implicitly acknowledge this already by the substantial government-funded programs that provide health care to children, the elderly, poor and disabled. Hospitals must provide emergency treatment to anyone who needs it. Our laws, policies and ethics require treatment, yet our health-care financing system is not built to deliver it.

We must decouple employment and health insurance. Whether one is self-employed or works part time, whether one’s employer chooses to offer health insurance and what insurance plans are provided should not determine whether a person can afford health care. Employers should be focused on providing goods and services.

Our system must put health-care dollars into health care and allow doctors to focus on medicine. Reducing administration costs to the 16 percent spent by non-profit insurance companies would save $982 per person. Eliminating the staff that hospitals and physicians dedicate to claims administration would free up even more dollars. The money saved on administration and profit could cover all of the uninsured and enhance the coverage provided by basic plans.

Last, we must acknowledge that governments, employers and individuals already spend a substantial sum on health care. If we spend according to a comprehensive plan instead of filling gaps, we can achieve the goal of universal health insurance.

The proposals

Better Health Care for Colorado

Medicaid-funded insurance subsidies for those under 300% of the federal poverty level (FPL)

Basic benefit package through large pool with annual benefit cap; individuals can use subsidy to purchase employer-sponsored insurance

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